CITY OF QUINCY, FLORIDA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015

Transcription

1 ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015

2 ANNUAL FINANCIAL REPORT AND COMPLIANCE REPORTS OF THE CITY OF QUINCY, FLORIDA FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015

3 ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 TABLE OF CONTENTS I. INTRODUCTORY SECTION PAGE Letter of Transmittal i List of Principal Officials v II. FINANCIAL SECTION Independent Auditors Report 1 Management s Discussion And Analysis 3 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position 13 Statement of Activities 14 Fund Financial Statements: Governmental Fund Financial Statements: Balance Sheet Governmental Funds 15 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 16 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 17 Reconciliation of the Statement of Revenues, Expenditures, and Changes In Fund Balances Governmental Funds to the Statement of Activities 18 Proprietary Funds: Statement of Funds Net Position Proprietary Funds 19 Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds 21 Statement of Cash Flows Proprietary Funds 22 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets Fiduciary Funds 24 Statement of Changes in Fiduciary Net Assets Fiduciary Funds 25 Notes to Financial Statements 26 Required Supplementary Information Police and Firemen s Supplemental Pension Plan Schedule of Progress / Funding Schedule Contributions Footnotes 55 Other Postemployment Benefits Schedule of Funding Progress 58 Budgetary Comparison Schedule: General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual 59 CRA Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual 60 Notes to the Required Supplementary Information Budgetary Comparison Schedule 61

4 ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 TABLE OF CONTENTS (Concluded) II. FINANCIAL SECTION (concluded) Combining Fund Financial Statements: Combining Balance Sheet Non- Major Special Revenue Funds 62 Combining Statement of Revenue, Expenditures, and Changes in Fund Balance 63 Combining Balance Sheet Non-Major Governmental Funds 64 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds 65 Combining Statement of Fund Net Position Non-Major Proprietary Fund 66 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Non-Major Proprietary Funds 68 III. OTHER INDEPENDENT AUDITOR S REPORTS AND SCHEDULES Additional Elements of Report Prepared in Accordance with Government Auditing Standards, Issued by the Controller General of the United States; the Rules of the Auditor General of the State of Florida; and Other Contract Requirements Schedule of Expenditures of Federal Awards and State Financial Assistance 69 Independent Auditor s Report on Internal Control Over Financial Reporting an on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 70 Independent Accountants Report on Compliance with Section , Florida 72 Statutes Independent Auditor s Management Letter Required By Chapter , Rules of the State of Florida Office of Auditor General 73 Schedule of Findings and Questioned Costs 75

5 INTRODUCTORY SECTION

6 June 29, 2016 To the Honorable Board of City Commissioners and to the Citizens of the City of Quincy Quincy, Florida The Annual Financial Report (AFR) of the City of Quincy (the "City") for the fiscal year ended September 30, 2015, is respectfully submitted. State law requires that a complete set of financial statements be published within nine months of fiscal year end and presented in conformance with Generally Accepted Accounting Principles (GAAP) as applicable to governmental entities and audited in accordance with generally accepted auditing standards by licensed independent certified public accountants. This report was prepared by the Finance Department of the City of Quincy (as part of the Finance Director's legally prescribed duties as the Chief Financial Officer of the City) of which the City Manager and his staff are responsible for the contents of this AFR. We believe the financial information presented is accurate in all material respects, and is set forth in a manner designed to present fairly the financial position and results of operations of the City as measured by the financial activity of its various funds. The report contains all of the disclosures necessary to enable the reader to gain the maximum understanding of the City's financial affairs. The City established a comprehensive internal control framework, to provide reasonable but not absolute assurance that assets are safeguarded against loss from unauthorized use or disposition and ensure that the financial records for preparing financial statements and maintaining accountability for assets are reliable. The concept of reasonable assurance recognizes that the cost of control should not exceed the benefits likely to be derived and that the evaluation of costs and benefits requires judgments and estimates by management. All internal control evaluations occur within the above framework. We think that the City's internal controls adequately safeguard assets and provide reasonable assurance of properly recorded financial transactions. In compliance with the laws of the State of Florida, the City's independent auditors, Moran & Smith LLP, have audited the financial statements. This firm is a certified public accounting firm, licensed by the State of Florida. In addition to meeting the requirements set forth in State Statutes, the audit was also designed to meet the requirements of the Federal and State Single Audit Act and the related U.S. Office of Management and Budget's Circular A-133. Auditing standards generally accepted in the United States of America and the standards set forth in the Government Accountability Office's Government Auditing Standards were used by the auditors in conducting the engagement. i

7 The audit was performed to provide reasonable assurance that the financial statements are free of material misstatement for the fiscal year ended September 30, The audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion and that the City's financial statements for the fiscal year ended September 30, 2015, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. The Annual Financial Report contains two major sections: the Introductory and Financial Sections. The Introductory Section, which is unaudited, is designed to give the reader some basic background about the governmental unit as a whole. This letter of transmittal will present a brief overview of the City's structure and services and a discussion of the City's financial condition. The financial section includes the Management's Discussion and Analysis (MD&A), basic notes to the financial statements, combining statements and supplemental information as well as the Independent Auditors' Report on the financial statements and schedules. GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Quincy's MD&A can be found in the financial section following the Independent Auditors' Report. City Services and Reporting Entity The City operates under a commission/administrator form of government, with a governing board consisting of five city commissioners. The City is divided into five geographical districts, with five commissioners elected from one of each of these separate districts. The City of Quincy's Board of City Commissioners (the "Commission") exercises a varying degree of budgetary control, including administrative policy control, over the activities of the City. The primary government includes the General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Funds, Internal Service Fund and Enterprise Funds. Budgetary control (i.e., the level at which expenditures cannot exceed the appropriated amount) is established at the fund level, pursuant to Section , Florida Statutes. Budgets for all governmental fund types are adopted on a basis consistent with GAAP. The Finance Department, on behalf of the City Manager is responsible for the preparation of the City's budget. The legally adopted total appropriation by fund may only be changed by Resolution of the Board. Through agenda items, the Board also approves all budgetary expenditures greater than $10,000. Full authority to expend budgetary amounts other than these instances is delegated to the City Manager. When the Board adopts the program budget, it is integrated into the reporting system for management reporting purposes. Budget-to-actual comparisons are provided in this report for each fund for which an appropriated annual budget has been adopted. Original and final budgets for major governmental funds are also provided. ii

8 Financial Condition of the City The information presented in the financial statements is best understood when considered from the broader perspective of the environment that the City operates. Financial condition reflects the City's existing and future resources and claims on those resources. Information useful in assessing financial condition include a review of the major initiatives along with the prospects for the future, a summary of the economic conditions, current and planned City capital projects and acquisitions, cash management and investment practices and risk management policies. Major Accomplishments The City has made great strides in reducing its accounts payable, reducing this amount from $4,550,015 in Fiscal Year 2014 to $2,334,313. It is committed to treating suppliers and service providers in a business-like manner. The City s conservative budget and spending approach (just because it is budgeted does not mean it has to be spent) has bolstered fund balance and retained earnings. Prospects for the Future The State unemployment rate as of September 30, 2015 was 5.10% and the City rate trailed at 6.70%. City looks forward to new businesses such as Capital Hydraulic, Roses department store and Taco Bell. As the State eases out of the recession and State employees receive pay increases, the City will continue to receive positive economic impact. Economic Conditions and Outlook The low cost of power placed the City among the lowest electric cost providers in the State. The relatively lower cost of electric power will assist in marketing downtown business development and in attracting new businesses to the community. With additional construction of the new Dollar Tree Store and the expanded presence of Tallahassee Community College in the City, there are encouraging signs. Risk Management Risk management is the process of managing the City of Quincy's activities in order to minimize the total long-term cost to the City for all accidental losses and their consequences. The main elements of the Risk Management Program are risk identification, risk control (loss reduction) and risk financing (restoration of the economic damages of losses incurred). Pursuant to Commission action, the Risk Management function was created to review and identify areas of risk, loss and insurance coverage for each participant. This function is also charged with the establishment and implementation of a safety plan, which incorporates loss prevention and safety standards. In addition, the function establishes standard insurance and indemnification provisions for contracts, leases, and other special use agreements entered into by the participating governmental units. The City of Quincy purchased commercial coverage for automobile liability, general liability, property, aviation and pollution liability. Presently, the City's Risk Management Program calls for self-insuring many types of risk, subject to the following limitations: iii

9 Type of Risk Amount of Risk Retained by City Limit of Excess Insurance Coverage Workers Compensation $ 0 Statutory General Liability $10,000 $1,000,000/$2,000,000 Automobile Liability $10,000 $300,000 Property Actual Loss $ 5,000 $17,118,096 2% value with Named Wind Storm minimum $25,000 $17, 118,096 The limits stated above are on a per occurrence basis. Cash Management In April 2003, the City of Quincy's Commissioners revised the City's Investment Policy based on recommendations by the Finance Director. With respect to the City Commissioners, the Finance Director serves as custodian of City funds and disburses funds on their behalf as required by law, and applicable management directives. The City utilizes the services of an investment advisor to assist the City with the investment of its unrestricted investments. The current interest rate environment, which has been at historical lows since August of 2008, and the recent increase in the fed funds rate, warrants maintaining a short duration portfolio. Acknowledgments An Annual Financial Report of this nature could not have been prepared without the efficient and dedicated service of all staff members involved. We would like to express appreciation to the staff of the Finance Department for their efforts in producing this report. Finally, thanks to the City Commissioners for the interest, patience and support in planning and conducting the fiscal operations of the City of Quincy. Michael Wade City Manager iv

10 THE CITY COMMISSION Derrick Elias Mayor Keith Dowdell Commissioner Angela Sapp Commissioner Derrick Elias Commissioner Andy Gay Commissioner Daniel McMillan Commissioner v

11 FINANCIAL SECTION

12 INDEPENDENT AUDITORS REPORT Honorable Mayor, City Commissioners and City Manager Quincy, Florida Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Quincy, Florida (the City), as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2015, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 2 to the financial statements, during the current year, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, Pensions Transition for Contributions Made Subsequent to the Measurement Date. These statements require employers participating in defined benefit plans to report the net pension liability and other pension related deferred inflows and outflows related to these plans. In connection with the implementation of these statements, the City decreased its beginning net position in the governmental activities by $2,386,080. Our opinion is in not modified with respect to this matter. 1

13 INDEPENDENT AUDITORS REPORT (Continued) Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information, and the other postemployment benefits schedule of funding progress on pages 4 through 14 and pages 61 through 66 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, combining and individual non-major fund financial statements and schedules, and schedule o f exp end it ures o f state financ ial assista nce, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual non-major fund financial statements and schedules, and the schedule of expenditures of federal and state awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. The introductory sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 6, 2015, on our consideration of the City s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City s internal control over financial reporting and compliance. Moran & Smith June 29, 2016 Quincy, Florida 2

14 Management s Discussion and Analysis

15 MANAGEMENT'S DISCUSSION AND ANALYSIS This discussion and analysis of the City of Quincy s (the City ) financial statements is designed to introduce the basic financial statements and provide an analytical overview of the City s financial activities for the fiscal year ended September 30, The basic financial statements are comprised of the government-wide financial statements, fund financial statements, and footnotes. As management of the City of Quincy, Florida, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, Please read it in conjunction with the accompanying basic financial statements beginning on page 15. FINANCIAL HIGHLIGHTS The City's net position at September 30, 2015, was $4.513 million as compared to $2.973 million for fiscal year 2014 as restated for GASB 68 compliance. The City s unrestricted net assets as of September 30, 2014, were negative $7.074 million (GASB 68 restatement) compared to negative $6.443 million for fiscal year ended September 30, Unrestricted net assets decreased $86 thousand in governmental fund net assets and increased $717 thousand increase in the Enterprise funds. Governmental activities net position were $12 thousand as of September 30, 2014, versus negative $1.286 million as of September 30, The total revenues from all sources were $24.7 million for the fiscal year 2015 versus $24.5 million for the fiscal year While Enterprise fund revenue increased $334 thousand, governmental fund revenue decreased $137 thousand. The total cost of all City programs was $23.2 million for the fiscal year 2015 versus $26.1 million for the fiscal year Overall, there were decreases in expenses in the Governmental Funds of $137 thousand and a decrease in the Enterprise Funds of $2.8 million. During fiscal year 2015, the City's governmental and business activity total expenses exceeded revenues (change in net assets) by $1.1 million while the expenses exceeded revenue by $660 thousand for Total expenditures in the Governmental Funds o f $9.536 million exceeded total revenues of $3.7 million by $5.836 million, excluding net transfers of $4.537 million for fiscal year 2015, while total expenditures for fiscal year 2014 of $9.671 million exceeded total revenues of $3.836 million by $5.834 million, excluding net transfers in the amount of $4.346 million. The General Fund s fund balance was $283 thousand for fiscal year 2014, and increased to $437 thousand at the end of fiscal year The City's total long-term debt of bonds and notes payable is $ million as of September 30, 2015 representing a decrease of $1.247 million from $ million as of September 30,

16 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. There are three components of the financial statements: (1) Government-wide financial statements which include the Statement of Net Assets and the Statement of Activities, which provide information about the activities of the City as a whole. (2) Fund financial statements, which tell how these services were financed in the short term, as well as what remains for future spending. Fund financial statements also report the City's operations in more detail than the government-wide statements, providing information about the City's most significant funds. (3) Notes to the financial statements. REPORTING THE CITY AS A WHOLE Statement of Net Assets and the Statement of Activities (Government-wide) A frequently asked question regarding the City's financial health is whether the current year's activities contributed positively to its overall financial well-being. The Statement of Net Assets and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account, regardless of when cash is received or paid. These two statements report the City's net position and changes therein. Net position, the difference between assets and liabilities, are one way to measure the City's financial health, or financial position. Over time, increases or decreases in net position are an indicator of whether the financial health is improving or deteriorating. The Statement of Net Position and the Statement of Activities present information about the following: Governmental activities - All of the City's basic services are considered to be governmental activities, including general government, community development, public safety, public services, and recreation. Property taxes, sales taxes, utility taxes, and franchise fees finance most of these activities. Proprietary or Business type activities - The City charges a fee to customers to cover all of the costs of the services provided.. 4

17 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) REPORTING THE CITY'S MOST SIGNIFICANT FUNDS Fund Financial Statements The fund financial statements provide detailed information about the most significant funds - not the City as a whole. Some funds are required by State law. However, management establishes other funds, which aid in the management of money for particular purposes or meet legal responsibilities associated with the usage of certain taxes, grants, and other money. The City's three types of funds; governmental, proprietary, and fiduciary use different accounting approaches as explained below. Governmental funds Most of the City's basic services are reported in governmental funds. Governmental funds focus on how resources flow in and out, as well as the balances remaining at year end that are available for spending. These funds are reported using an accounting method called the modified accrual accounting method, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information shows whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. The basic governmental fund financial statements can be found on pages 15 through 18 of this report. Proprietary funds - The City has two kinds of proprietary funds. Enterprise funds are used to report the same functions presented in the business-type activities in the government-wide financial statements. The City maintains the following enterprise funds: sewer, electric, water, gas, refuse, landfill and telecommunications. They charge customers for the services they provide. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City s various functions. The City maintains one internal service fund to account for information technology services provided both to the general government and to the enterprise funds. The amount of the allocation is based on an equal distribution of cost across all departments. All of these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. The basic proprietary fund financial statements can be found on pages 19 to 23 of this report. Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 24 and 25 of this report. These funds are presented on a governmental fund financial statement and a proprietary fund financial statement format. The City s major funds are presented in separate columns on the fund financial statements. The definition of a major fund is one that meets certain criteria set- forth in GASB 34. The funds that do not meet the criteria of a major fund are considered non- major funds and are combined into a single column on the fund financial statements. Table 1 on page 6 summarizes the major features of the basic financial statements.. 5

18 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Notes to the Financial Statements Notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements. Refer to Note 1 of the financial statements for more detailed information on the elements of the financial statements. Table 1: Major Features of the Basic Financial Statements Scope Government-wide Fund Financial Statements Entire City government (except fiduciary funds) and the City s component unit Governmental Funds Activities of the City that are not proprietary or fiduciary Fund Financial Statements Proprietary Funds Activities of the City that are operated similar to private businesses Fiduciary Funds Instances in which the City is the trustee or agent for someone else s resources Required financial Statements Statement of Net Assets, Statement of Activities Balance Sheet, Statement of Revenues, Expenditures, and Changes in Fund Balances Statement of Net Assets Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows Statement of Fiduciary Net Assets Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources focus Accrual accounting and economic resources focus Accrual accounting and economic resources focus Type of asset/liability information All assets and liabilities, both financial and capital, and short-term and long-term Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included All assets and liabilities, both financial and capital, and shortterm and long-term All assets and liabilities, both short-term and longterm Type of inflow/outflow information All revenues and expenses during the year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year Expenditures when goods or services have been received and payment is due during the year or soon thereafter All revenues and expenses during the year, regardless of when cash is received or paid All revenues and expenses during the year, regardless of when cash is received or paid 6

19 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City, total net assets exceeded liabilities by $4.513 million at the close of fiscal year 2015 as compared to $2.973 million (GASB 68 restatement) in fiscal Year For fiscal year 2014, Governmental Activities comprised $12 thousand of the net assets while Business Activities comprised $2.961 million of net assets versus fiscal year 2015 where Governmental was negative $1.286 million and Business $5.799 million. By far, the largest portion of the City's total assets, for fiscal year 2014 and for fiscal year 2015 is its investment in capital assets (e.g., land, buildings, machinery, and equipment). The City uses these capital assets to provide services to citizens; consequently, these assets are not available for spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Table 2 Statement of Net Position As of September 30, 2015 and 2014 Governmental Business - Type Total Assets: Current & Other $ 1,619,014 $ 1,435,531 $ 8,791,984 $ 7,378,811 $ 10,410,998 $ 8,814,342 Capital 6,384,367 7,818,786 21,559,038 22,995,207 27,943,405 30,813,993 Deferred Outflow 369,647 Total Assets and Deferred Outflows 8,373,028 9,254,317 30,351,022 30,374,018 38,354,403 39,628,335 Liabilities Long - Term Debt 3,680,416 4,091,836 17,556,052 19,077,707 21,236,468 23,169,543 Other Liab 3,182,356 2,764,287 6,995,073 8,335,149 10,177,429 11,099,436 Net Pension Liability 2,620,070 Deferred Inflow for Pension 176,889 Total Liabilities and Deferred Outflows 9,482,842 6,856,123 24,551,125 27,412,856 31,413,897 34,268,979 Net Position Invested in Capital 2,198,922 3,564,480 6,482,842 3,568,503 8,681,764 7,132,983 Restricted 401, ,671 1,873,485 2,665,908 2,274,551 2,914,579 Unrestricted (3,886,690) (1,414,957) (2,556,431) (3,273,249) (6,443,121) (4,688,206) GASB 68 prior period adjustment (2,386,080) (2,386,080) Total Net Position $ (1,286,702) $ 12,114 $ 5,799,896 $ 2,961,162 $ 4,513,194 $ 2,973,276 An additional portion of the City's net assets (54%) for fiscal year 2014 versus (50%) for fiscal year 2015 represents resources that are subject to external restrictions on how they may be used. Net Assets is one measure that can be used in determining the City s ability to meet its obligations. Because the debt of the government is matched with the related assets, this number may be negative from time to time. In this case, the unrestricted net assets for fiscal year 2015 are negative $6.443 million versus negative $7.074 million (GASB 68 restatement) for fiscal year

20 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Governmental Activities Governmental activities decreased the City's net assets by $1.3 million from fiscal year 2014 to fiscal year The Business-type activities increased the net assets by $2.8 million from fiscal year 2014 to fiscal year Key elements of these changes are as follows: Table 3 Changes in Net Position Governmental Business - Type Total Revenues Charges for Services $ 565,290 $ 618,417 $ 21,014,701 $ 20,617,854 $ 21,579,991 $ 21,236,271 Property Taxes 1,359,927 1,380,391 1,359,927 1,380,391 Local Option Fuel 502, , , ,754 Utility Taxes 10,425 9,016 10,425 9,016 Communication Service Tax 241, , , ,918 Shared Revenues 715, , , ,569 Investment Earnings (22,195) 61,467 (14,154) 48,504 (36,349) 109,971 Other 327, , , ,214 Total Revenue 3,700,068 3,836,746 21,000,547 20,666,358 24,700,615 24,503,104 Program Expenses General Government 3,750,563 3,621,163 3,750,563 3,621,163 Public Safety 3,829,033 3,828,983 3,829,033 Transportation 130, , ,220 3,828,983 Physical Environment 780, , , ,749 Recreation 385, , , ,089 Economic Environment 560, , , ,821 Interest 101, , , ,624 Electric 8,564,284 9,858,773 8,564,284 10,018,576 Water 1,394,482 1,432,413 1,394,482 1,432,413 Sewer 1,520,175 1,758,112 1,520,175 1,758,112 Non-Major 2,144,943 3,380,870 2,144,943 3,380,870 Total Expenses 9,536,815 9,671,232 13,623,884 16,430,168 23,160,699 26,101,400 Excess (deficit) before transfers (5,836,747) (5,834,486) 7,376,663 4,236,190 1,539,916 (1,598,296) Transfers 4,537,930 4,346,387 (4,537,930) (4,346,387) - - Extraordinary Item 938,227 - Change in net assets (1,298,817) (1,488,099) 2,838, ,030 1,539,916 (1,598,296) Net Assets Beginning 2,398,194 4,560,570 2,950,059 2,950,059 5,348,253 7,510,629 Prior Period Adjustments (2,386,080) (674,277) (816,927) (816,927) (3,203,007) (1,491,204) Adjustments to Beginning 12,114 3,886,293 2,133,132 2,133,132 2,145,246 6,019,425 Ending Net Position $ (1,286,703) $ 2,398,194 $ 4,971,865 $ 2,961,162 $ 3,685,162 $ 4,421,129 8

21 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) The City's programs include primarily General Government, Public Safety, Transportation Services, Economic and Physical Environment Services, and Recreation/Culture Services. Each program's net cost (total cost, less revenues generated by the activities) is presented below. The net cost shows the extent to which the City's general taxes support each of the City's programs. Table 4 Governmental Activities Total Cost Net Cost Total Cost Net Cost of Services of Services of Services of Services General Government $ 3,750,563 $ (3,659,541) $ 3,621,163 $ (3,474,871) Public Safety 3,829,033 (3,393,397) 3,828,983 (3,390,517) Transportation 780,077 (693,375) 272,089 (272,089) Culture 946,749 (521,667) 946,749 (832,152) Economic Environment 385,289 (374,239) 321,624 (296,624) Physical Environment 130,220 (130,220) 520,821 (487,162) Interest 101,334 (101,334) 159,803 (159,803) Total $ 9,923,265 $ (8,873,773) $ 9,671,232 $ (8,913,218) The cost of all governmental activities this year was $9.92 million. As shown in the Statement of Activities, $565 thousand of this cost was paid for by those who directly benefited from the programs. The remaining source of funding came from transfers from business activities in the amount of $4.537 million, various taxes in the amount of $2.247 million and the remaining $789 thousand is investments, shared revenues and other miscellaneous revenues. The nature of governmental activities is to be funded primarily from taxes and other non-governmental activities. Governmental activities are not normally self-supporting. As a result, the combination of taxes and nongovernmental activities are sufficient to cover program expenses. 9

22 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Table 5 Business Actities Total Cost Net Cost Total Cost Net Cost of Services of Services of Services of Services Electric $ 8,564,284 $ 6,078,306 $ 9,858,773 $ 3,680,692 Water 1,394, ,419 1,432, ,635 Sewer 1,520, ,468 1,758,112 30,964 Non-Major 2,144, ,625 3,380, ,395 Total $ 13,623,884 $ 7,390,818 $ 16,430,168 $ 4,187,686 Business Type Activities Net assets of the Proprietary Funds at September 30, 2015 were $2.79 million, which was up from $2.96 million in fiscal year Transfers from the Utility Funds to the General Fund were $4.537 million in fiscal year 2015 compared to in fiscal year It is noteworthy that the Proprietary Funds net revenue increased from $4.187 million in fiscal year 2014 to $2.346 million in fiscal year While the electric utility has been very profitable for years profitable, the water and sewer utilities turned profitable during fiscal year FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Governmental Funds - The focus of the City's governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements and is an accommodation to assist the budget process. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the fiscal year 2015, the City's governmental funds reported combined ending fund balance of $838,816. This represents an increase of $314,965 when compared to fund balances in fiscal year 2014 which was 523,

23 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Capital Assets The capital assets of the City are those assets that are used in the performance of City functions. Capital assets include equipment, buildings, land, park facilities, etc. The City previously elected to defer retroactive application of the capitalization requirements of GASB Statement No. 34 to major general infrastructure assets acquired in fiscal years ended after June 30, 1980, or that were significantly reconstructed or improved during that multi-year period. The City now has chosen to report infrastructure assets and to depreciate them as well. The summary of these assets is included in the amount shown for entity-wide statements as well as Note 6. The City's investment in capital assets for its governmental and business-type activities as of September 30, 2015, amounts to $ million (net of accumulated depreciation) compared to $ million at September 30, The decrease of $2.882 million resulted primarily from depreciation. Table 6 Capital Assets net of depreciation Governmental Business-Type Primary Governmental Business-Type Primary Activities Activities Government Activities Activities Government Land $ 4,606,224 $ 1,611,475 $ 6,217,699 $ 4,596,873 $ 1,611,475 $ 6,208,348 Building and Improvements 4,935,713 25,050,855 29,986,568 4,903,973 25,050,855 29,954,828 Improvements other than Building 10,651,120 19,580,654 30,231,774 10,651,120 19,574,911 30,226,031 Infrastructure 6,152,319 1,509,415 7,661,734 6,146,814 1,509,415 7,656,229 Furniture, Fixtures and Equipment 6,369,049 4,505,644 10,874,693 6,346,000 4,461,851 10,807,851 Total Assets 32,714,425 52,258,043 84,972,468 32,644,780 52,208,507 84,853,287 Less Accumulated depreciation 26,341,660 30,699,005 57,040,665 24,825,994 29,213,300 54,039,294 Total $ 6,372,765 $ 21,559,038 $ 27,931,803 $ 7,818,786 $ 22,995,207 $ 30,813,993 Additional information on the City's capital assets can be found in Note 6 on page 38 of this report. 11

24 MANAGEMENT S DISCUSSION AND ANALYSIS (Concluded) Debt Currently the City uses debt financing on an as needed basis each year. At the end of fiscal year 2015, the City had total debt of $ million versus $ million for fiscal year 2014, inclusive of Compensated Absences (vacation and sick time owed to employees) which totaled $327 thousand and $350 thousand respectively. Revenue bonds amounted to $ million for fiscal year Notes payable in the amount of $5.750 million for fiscal year 2014 and $5.227 million for fiscal year 2015 are all secured by related assets. The remaining loans payable are secured by franchise fees and public services taxes. The capital leases are secured by equipment. Table 7 Outstanding Debt Governmental Business-Type Primary Governmental Business-Type Primary Activities Activities Government Activities Activities Government Revenue Bonds $ 3,752,000 $ 12,130,000 $ 15,882,000 $ 4,022,000 $ 12,550,000 $ 16,572,000 Capitalized Leases 125,328 1,127,957 1,253, ,866 1,222,799 1,358,665 Compensated Absences 245,405 82, , , , ,224 Notes Payable 137,872 5,227,233 5,365,105 96,440 5,653,905 5,750,345 Landfill 443, , , ,320 Total $ 4,260,605 $ 19,010,773 $ 23,271,378 $ 4,484,058 $ 20,034,496 $ 24,518,554 Additional information on the City's debt can be found in Note 7 on page 36 of this report. NEXT YEAR S BUDGET AND ECONOMIC FACTORS The real estate market is improving nationally and similarly, Gadsden County and the surrounding counties of Leon, Jefferson, and Franklin have begun to see improvements in their housing markets. It is anticipated that as this trend continues the City of Quincy will see some improvements in new construction and its housing market as well. This improvement in the national economy is having an impact on the City s main industrial sector, principally Harborlite Corporation and Active Mineral, whose productions had remained flat during the downturn in the economy. These companies have begun to see increases in their production which implies increased utilization of the City s electric supply. The Sicamu Inc., an aerosol company, which relocated from Venezuela to locate on Strong Road, Quincy, started production in 2015 which will result in greater purchasing of the City s utilities. The City is prospecting that with the completion of the Downtown Master Plan some new businesses will locate in the downtown. The Leaf Theater and the Gadsden Art Center (the main business anchors at the downtown) are doing well. The Gadsden Art Center has announced $600,000 expansion in the coming year. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City's Finance Department, at the City of Quincy, 404 West Jefferson Street, Quincy, Florida

25 BASIC FINANCIAL STATEMENTS

26 STATEMENT OF NET POSITION SEPTEMBER 30, 2015 Assets Governmental Business-Type Primary Government Activities Activities Total Cash and Cash Equivalents $ 560,152 $ 1,685,620 $ 2,245,773 Investments 642,221 1,288,398 1,930,618 Accounts Receivable, Net 21,359 1,642,596 1,663,955 Assessment Receivables 172, ,699 Due from Other Governments 222, ,583 Inventories 0 478, ,055 Restricted Assets: Restricted Cash and Investments 0 1,873,485 1,873,485 Capital Assets: Nondepreciable 4,606,224 1,611,476 6,217,700 Depreciable, Net 1,766,541 19,947,562 21,714,103 Internal Balances 11,602 1,823,829 1,835,431 Total Assets 8,003,381 30,351,022 38,354,402 Deferred Outflows of Resources Deferred Outflows for Pensions 369, ,647 Liabilities Accounts Payable 171,784 2,162,528 2,334,313 Accrued Payroll 225,409 35, ,932 Accrued Interest 0 327, ,082 Accrued Compensated Absences 61,351 25,791 87,142 Bonds and Notes Payable 334, ,275 1,269,059 Customer Deposits 0 1,147,329 1,147,329 Unearned Revenue 76, ,450 Rate Stabilization 0 200, ,012 Noncurrent Liabilities: Accrued Compensated Absences 184,054 79, ,739 Bonds and Notes Payable 3,680,416 17,556,052 21,236,468 Net Pension Liability 2,620,070 2,620,070 Internal Balances 195,602 1,639,829 1,835,431 Other Postemployment Benefits Liability 1,932, ,932,922 Landfill Closure 0 443, ,019 Total Liabilities 9,482,842 24,551,125 34,033,967 Deferred Inflows of Resources Deferred Inflows for Pensions 176, ,889 Net Position Net Investment in Capital Assets 2,198,922 6,482,842 8,681,764 Restricted for: Debt Service 127,663 1,873,485 2,001,147 Public Safety 25, ,770 Economic Environment 247, ,633 Unrestricted (3,886,690) (2,556,431) (6,443,121) Total Net Position $ (1,286,703) $ 5,799,896 4,513,193 See accompanying notes to financial statements 13

27 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015 Net (Expense) Revenue and Program Revenues Changes in Net Assets Charges for Operating Grants Capital Grants Governmental Business- Type Functions/Programs Expenses Services and Contributions and Contributions Activities Activities Total Governmental Activities General Government $ 3,750,563 $ 91,022 $ 0 $ 0 $ (3,659,541) $ 0 $ (3,659,541) Public Safety 3,829, , (3,393,397) 0 (3,393,397) Physical Environment 130, (130,220) 0 (130,220) Transportation 780, ,202 8,500 (693,375) 0 (693,375) Economic Environment 385, ,050 (374,239) 0 (374,239) Culture and Recreation 560,299 38, (521,667) 0 (521,667) Interest on Long-term Debt 101, (101,334) 0 (101,334) Total Governmental Activities 9,536, ,290 78,202 19,550 (8,873,774) 0 (8,873,774) Business-type Activities Water Fund 1,394,482 1,595, , ,419 Electric Fund 8,564,284 14,642, ,078,306 6,078,306 Wastewater Fund 1,520,175 1,763, , ,468 Non-Major Funds 2,144,943 3,012, , ,625 Total Business-type Activities 13,623,884 21,014, ,390,818 7,390,818 Total Primary Government $ 23,160,699 $ 21,579,99 $ 78,202 $ 19,550 $ (8,873,774) $ 7,390,818 $ (1,482,956) General Revenues Taxes: Property Taxes 1,359, ,359,927 Discretionary Sales Surtax 385, ,284 Local Option Gas Tax 502, ,664 Sales Tax and Other Shared Revenues 593, ,522 Investment Earnings (22,195) (14,154) (36,349) Miscellaneous 217, ,824 Transfers 4,537,930 (4,537,930) 0 Total General Revenues and Transfers 7,574,957 (4,552,084) 3,022,873 Change in Net Position (1,298,817) 2,838,734 1,539,917 Net Position, Beginning of Year 2,398,194 2,961,162 5,359,356 Prior Period Adjustment (2,386,080) 0 (2,386,080) Net Position, Beginning of Year, Restated 12,114 2,961,162 2,973,276 Net Position, End of Year $ (1,286,703) $ 5,799,896 $ 4,513,193 See accompanying notes to financial statements 14